Research: Middle Managers Have an Outsized Impact on Innovation

Just the mention of “middle managers” is enough to make people’s eyes roll back. But these supposedly boring cogs of the corporation, these objects of derision in Dilbertland, can have a profound impact on innovation and performance. Companies need to pay attention to them and reward their special talent at making the best of the restrictions and limitations of their positions — of making lemonade from lemons.

For decades, researchers and businesspeople have assumed that in the thick of large organizations, what matters is process. Are the right resources available? Are incentives effective? If the organization isn’t being innovative, the solution must be structural.

My study of computer-game makers shows something different — that individuals matter a lot. And of all the individuals, the choice of who is middle manager on vital projects goes the furthest in explaining why some firms do better than others.

In a gaming-company context, middle managers have the job title of “producer” (primarily because it is thought to be a cooler-sounding title than “project manager”), and they supervise designers, who are the sources of creative ideas. After controlling for many factors, such as the genre of the game and the size of the project, I found that individual producers account for 22.3% of the variation in company revenue. Designers, by contrast, account for just 7.4% of the variation — a relatively marginal impact. For comparison, everything else that’s part of the firm, whether it’s senior managers or strategy or marketing, accounts for just 21.3% of the variation in firm performance. (The rest is due to exogenous factors such as changes in technology and the marketplace, as well as some of the natural variation in any creative products). What’s more, the talent of individuals was portable — when they left one company for another, they took their ability with them.

Producers’ impact extends beyond firm performance. When I looked at which group was responsible, and to what degree, for variations in product quality, as measured by critics’ responses to games, the numbers were similar.

Why do project managers have such a large impact? The answer has to do with the difficult, but often critically important, situation they find themselves in. Higher-ups don’t give them the resources they want, and subordinates are annoyed by the directives the project managers are mandated to promulgate. Squeezed from above and below, they have to make do. Some people are very bad at this and destroy value. But some are really good at it. The best have a knack for turning restrictions on resources into creative solutions. It’s almost magical.

For example, think of the middle manager (yourself, perhaps?) whose team, for budget reasons, was never restored to full strength after a couple of departures, and who responded by reassigning responsibilities in a creative way that made everything work better — to the point where everyone wondered why those additional people were ever needed.

Middle managers’ position is also critical in that they function as the facilitators, nurturers, and selectors of creativity. They’re the ones to get the creatives excited about a project, keep them on time and on budget, solve interpersonal problems, and select from the creatives’ ideas. They speak up when the creatives’ ideas are unrealistic or too difficult to implement. Good middle managers can also help create “collective creativity,” making sure that the sum of innovative work is greater than its individual parts by establishing healthy team dynamics.

When you study companies, you see that the good project managers are widely known. There’s respect for their abilities — sometimes it’s grudging, but it’s real respect. Everyone has a sense of how important they are.

But that doesn’t stop companies from ignoring them. The middle-management position is usually seen as a way station to “real” management. Companies make little effort to retain the most effective middle managers. A lot of project managers buy into this view, accepting that they should do everything possible to shed the “middle” label and move on.

But the reality is that good middle managers are a valuable resource. If you take a really effective middle manager out of his or her role, it’s unlikely that someone else will be able to do the job as well. And a number of managers like the middle. They know they’re effective there. Companies would do better to support the best of these managers and encourage them to stay in the middle, if that’s their chosen profession (and it is a profession).

One way to encourage them to stay is to frame the job description so that it doesn’t sound like a stepping-stone to something else. Another is to create a career path that doesn’t necessarily involve promotion out of project management. Have them aim for the role of “chief project manager.” Assign them to teams where they can deploy their special talents in interesting, challenging ways. Does one of them excel at fast turnarounds? Another at getting creative people to stop fighting? Another at resurrecting supposedly doomed projects? Make sure these skills get used.

Most of all, don’t think of middle managers as interchangeable parts. They are individuals, and many have significant talents.

Corporate leaders spend a lot of time worrying about the impact of their strategy. But they overlook the impact of the people who make the thousands of small, critical choices that truly make the difference between success and failure.